Health Care

Lawmakers learn shady management companies could benefit from Medicaid expansion

November 22, 2019

Ray Carter

Medicaid expansion has been touted as a way to shore up financially troubled rural hospitals, even though rural hospitals continue to close in expansion states. But at a recent legislative study, lawmakers learned the beneficiaries of Medicaid expansion may include management companies that have run several rural Oklahoma hospitals into the ground.

“During the session, people had come up to me about the issue, that the state should do something, step in, or Medicaid expansion would save our rural hospitals,” said Rep. T.J. Marti, a Broken Arrow Republican who requested the study. “I’m a strong supporter of patient access. I believe that patient access and access to good health care is very important for Oklahoma and the cities and counties that these hospitals are in. I just don’t believe that the state should fund a broken system.” 

Marti said some out-of-state management companies have simply taken on new names and have been “raiding our hospitals over and over again.” 

Several former employees of the Haskell County Community Hospital in Stigler discussed how one management company effectively destroyed the hospital’s viability and wrecked the lives of many of its employees. 

Jaclyn Nixon, former emergency room director and nurse at Haskell County Community Hospital, said things went downhill quickly when the hospital was taken over by EmpowerHMS in 2017. Linens were soon in short supply. The hospital’s premiums for liability insurance, which protected hospital employees from being sued as individuals, were not paid promptly. 

Darla Barger, former human resources director at Haskell County Community Hospital, said some employees worked for six weeks without pay. When individuals did get paid, money was taken out of their checks for health insurance coverage and other benefits, as is normal, but employees soon learned the money was never sent to the insurance provider and they had no coverage. Employees later learned the hospital also neglected to pay unemployment taxes. 

“A hospital with no linens, no cable, no faxes, no malpractice insurance, no payroll, no insurance for employees, money stolen from their 401ks, no blood bank, no x-rays, no MRI—that’s what’s going on in Oklahoma rural hospitals currently,” Marti said, summing up the testimony. 

EmpowerHMS dissolved in January 2019, but effectively re-formed under a new name and remained in charge of the Stigler hospital. Nixon said it was “the exact same people, except they just changed chairs in the company.”

The Haskell County Community Hospital was one of four owned by EmpowerHMS, along with hospitals in Drumright, Prague, and Fairfax. Another hospital, in Wilburton, was managed by the company. All of them experienced similar challenges under EmpowerHMS, former Haskell County Community Hospital employees told lawmakers. 

One reason EmpowerHMS CEO Jorge A. Perez and other officials with the management company chose to enter the rural hospital market was to gain control of facilities given the “critical access hospital” designation by the Centers for Medicare and Medicaid Services. Hospitals with that designation receive higher Medicare payments, and they often receive higher reimbursement from private insurance for certain procedures, based on the theory that higher payments are needed to keep those rural facilities afloat. 

Cori Loomis, an attorney with the Christensen Law Group, noted that rural hospitals can be paid up to five times the amount paid to other hospitals for things like urine test analysis. Exploiting that payment system was a major focus of EmpowerHMS and similar management companies. At one Oklahoma hospital (not among those operated by EmpowerHMS), Loomis said the facility went from doing $1 million in annual billing for lab work to $70 million in just one year. The actual lab work was conducted in Texas, she said. 

While Perez’s scheme focused on defrauding private insurance companies through inflated billing for lab tests, Loomis said it is likely that government programs were also defrauded.

“One area where management companies, outside of the lab thing, can get into fraud is the cost-report issue,” Loomis said. “And if those management-company fees are excessive and they’re inflating their cost report to Medicare, that is Medicare fraud. So they probably had multiple schemes going.”

Patti Davis, president of Oklahoma Hospital Association, touted Medicaid expansion as a cure for rural hospitals like Haskell County Community Hospital, saying expansion would have increased total taxpayer spending on Oklahoma health care by $5 billion. 

But Rep. Cynthia Roe, a Lindsay Republican and nurse, noted Medicaid expansion would generate more money for companies like EmpowerHMS.

“Had we expanded Medicaid, how much of that $5 billion the state would have benefited from would have gone into Mr. Perez’s pocket instead of in the hospitals and in the communities that lost their hospitals because of mismanagement?” Roe asked.

“I cannot answer that question,” Davis said. “I’ve never done the math. Don’t know.”

As things stand today, former employees of Haskell County Community Hospital worry that officials like Perez could take advantage of other rural hospitals.

“So many lives are going to be lost and suffer, while the people who put us in this situation are still able to be involved and purchase and manage hospitals and facilities, doing the same thing to other people,” Nixon said. 

Even should Oklahoma expand its Medicaid program to include hundreds of thousands of able-bodied adults, officials indicated there is little chance recently closed hospitals will be re-opened, and officials also conceded that many rural facilities are not truly viable. 

Rep. Jim Grego, R-Wilburton, noted that his community’s hospital closed in the aftermath of the EmpowerHMS scandal. He said other hospitals have shown little interest in purchasing the Wilburton facility.

“When I’ve talked to McAlester Regional Hospital, they say the building is so old it has no value as a hospital anymore,” Grego said. “If they were to try to open something up, they would just need to level it and start over. So what do you have for an asset if they’re just going to have to level it?”

Davis conceded that many rural hospitals are outdated and can no longer provide the quality of care expected by patients today.

“We know many of the facilities that we are talking about, the infrastructure was built in the ‘40s and ‘50s, and it no longer makes sense to build a full-service hospital with operating rooms and all the bells and whistles,” Davis said. “We need a new model for Oklahoma for these smallest communities, because if your population is shrinking you can’t support a full-service hospital, but you’re going to need emergency care, you’re going to need the ability to stabilize and transport, and you’re going to need the ability to drip an IV and maybe a little bit of antibiotic and maybe they can go home in 24 hours. But we absolutely believe there needs to be a new model for our smallest communities to be able to be sustainable and provide that access to care.”